That time of year is almost upon us, with schools in the south letting out in a couple of weeks, and those up north not far behind, the busy summer driving and vacation season is right around the corner. With earnings across the country rising and the economy appearing to be in much better shape than in the past five years, consumer spending could be poised to jump. While higher prices at the gas pump could crimp things some, most on Wall Street are pretty positive on the overall outlook for retail.

In two recent Merrill Lynch reports, the make the case that consumer spending for lower income consumer is actually outpacing that of middle and higher income consumers. It indeed bodes well for the overall purchasing picture if consumers feel good about spending now.

The analysts noted this:

Consumer confidence remains near its highest levels in 17 years while small business optimism is the highest on record. Revolving and non-revolving consumer credit growth remains healthy at 5%+. Personal interest payments (excludes mortgages) as a percentage of disposable personal income continues to rise from depressed levels with room for significant upside and the Financial Obligations Ratio continues to move up, but is at depressed levels that imply room for a significant increase in big ticket purchases over the next several years.

The analysts continue with their “Discount Store Decade” thesis, and they have six top pick stocks that make the cut. Here we focus on the four biggest companies. All are rated Buy at Merrill Lynch.

Costco Wholesale

This has become the ultimate destination for the American consumer regardless of the economy. Costco Wholesale Corp. (NASDAQ: COST) has a unique business model. It operates membership warehouses and the company buys the majority of its merchandise directly from manufacturers, essentially cutting out the middleman. Costco sells in bulk but also at a lower price, thus fueling its rapid growth. With consumers having more free cash to spend with gasoline prices still low, this major retailer may continue to see large revenue gains.

Costco remains one of the few conventional retailers where metrics like store traffic, market share gains and a validated model could bode well for international growth and expansion. The company is largely unharmed by e-commerce, and it continues to add stores in strategically mapped out locations.

Wall Street loves the company’s pricing authority on key items and the leading merchandising offerings, and the company’s relatively new Costco co-branded card with Visa is a real positive. Add in the company’s growing online presence, and the future looks bright.

Costco shareholders are paid a 1.17% dividend. The Merrill Lynch price target on the shares is $230, and the Wall Street consensus price objective was last seen at $210.13. The stock was trading early Thursday at $196.00 a share, and its 52-week trading range is $150.00 to $199.88.

Dollar Tree

This bargain retailer was hit hard back in February and could be offering a very compelling entry point. Dollar Tree Inc. (NASDAQ: DLTR) is one of the largest dollar store chains in the United States, with nearly $21 billion in revenues in 2017. The company operates 14,482 stores in 48 states and five provinces in Canada under the Dollar Tree, Family Dollar, and Dollar Tree Canada banners.

The company’s stores carry an assortment of consumables, general merchandise, and seasonal products. The spike in purchasing from lower income consumers could be a huge positive for Dollar Tree, given the company’s big presence in the discount market.

The Merrill Lynch has a price target of $130 per share, and the posted consensus target is $111.88. The shares were trading at $93.50 on Thursday morning. The 52-week trading range is $65.63 to $116.65.

Target

This company has had its share of issues over the past few years, but it seems like a solid and safe retail total return play now. Target Corp. (NYSE: TGT) is one of the largest discount retailers in the United States, operating roughly 1,800 Target stores across the country. The company sells merchandise in its Signature Categories Style, Baby, Kids and Wellness, as well as other products in both physical Target stores and online at Target.com.

Since 2017, Target has poured tons of money into its e-commerce offerings, overhauling its stores and refreshing its inventory to better compete against Amazon. Target has even embraced the same-day delivery concept. Most importantly, the company seems to have put some good distance between the headline issues that were public relations nightmares, and it continues to be a favorite destination of consumers.

Target shareholders are paid a stellar 3.55% dividend. The $86 Merrill Lynch price objective is well above the posted consensus target price of $76.12. Shares were changing hands on Thursday at $70.20, in a 52-week trading range of $48.56 to $78.70.

Walmart

The giant retailer is still on sale after being pummeled to start 2018. Walmart Inc. (NYSE: WMT) is the world’s largest retailer, operating retail stores under the formats of Walmart Stores, Supercenters, Neighborhood Markets, as well as Sam’s Club locations, in the United States, and it has a growing e-commerce business (including Jet.com). Internationally, Walmart also operates locations in several countries, including Argentina, Brazil, Canada, China, Japan, Mexico and the United Kingdom.

Each week, nearly 260 million customers and members visit the company’s 11,535 stores under 72 banners in 28 countries and e-commerce sites in 11 countries. With fiscal year 2017 revenue of nearly $486 billion, Walmart employs approximately 2.2 million associates worldwide.

The company has announced plans to acquire a 77% stake in India e-commerce retailer Flipkart in a $16 billion debt and cash transaction. The deal dramatically expands Walmart’s presence in India, where online retail is growing quickly and Flipkart is a leader. The deal is expected to close in fiscal 2019 and could be dilutive for the foreseeable future.

Shareholders of Walmart are paid a solid 2.51% dividend. Merrill Lynch recently lowered its price target to $98 as a result of the massive purchase. The posted consensus target price is $105.28. The shares were last seen trading at $83.35, in a 52-week trading range of $73.13 to $109.98.

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These are four of the biggest retailers which are continuing to fight the huge e-commerce presence of Amazon. Consumers continue to show loyalty to all four, and these companies may be poised to have big summer selling seasons, with consumer confidence continuing to be sky-high.

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